Ohio outranks W.Va. in gas rig presence

June 14, 2013

WHEELING - In hopes of extracting oil and wet forms of natural gas, drillers now have more rigs working in Ohio's Utica Shale than in West Virginia's Marcellus Shale.

Ohio Oil and Gas Association Executive Vice President Tom Stewart said the 32 rigs now working in his state is a fair number, but he knows there will need to be more to fully develop the Utica.

"This is going to take a lot more than 32 rigs," he said. "I remain very optimistic the number will go up."

Oilfield services company Baker Hughes Inc. regularly issues a report listing the number of rigs operating in each state. The number in West Virginia is now 23, the same as it was at this time last year. However, Ohio has seen an increase from the 19 working there in June 2012.

"Ohio is making a big move," said Corky DeMarco, executive director of the West Virginia Oil and Natural Gas Association. "If you look at it, I'd bet most of those rigs came out of Pennsylvania."

Pennsylvania has seen the number of rigs working there decline from 85 at this time last year to just 58 this year.

Generally, throughout the Marcellus and Utica shale formations, the farther east one drills for gas, the more likely the gas is to be of the dry type. The methane-dominated dry gas does not require much processing, so it is much more ready to be sent to market and used by energy companies such as Columbia Gas and Mountaineer Gas.

As drillers move their operations toward the west, they are more likely to find the liquids-rich wet gas - which, in addition to the dry methane gas, contains ethane, propane and butane. West Virginia has some pockets of wet gas, particularly in Ohio and Marshall counties.

Chesapeake Energy information shows that for a typical dry gas well, the company makes an average of $13,000 in revenue per day. This amount can be as high as $38,800 per day for wells that contain liquids.

"Right now, the price of (methane) natural gas is $3.77. If we can get it over $4, I think you'll see more activity in West Virginia," said DeMarco.

Natural gas is typically marketed in 1,000 cubic-foot units, each of which is known as an mcf.

The $3.77 per mcf price is sharply lower than in previous years but up from the near $2 per unit seen last year.

"Overall, the market is still strong in West Virginia. Only time will tell," DeMarco said. "If we are able to sell LNG (liquefied natural gas) on the world market, the prices will go higher."

Dominion Resources is working on a project to send LNG from its Cove Point project in Maryland to markets in India and Japan.

In addition to the gases, Ohio has some pockets of valuable crude oil in its Utica formation, but Stewart said technological advances would help turn the state into an oil play.

"It may require some advancements in well stimulation," he said regarding fracking operations. "I remain optimistic that, over the long-term, both large companies and small producers will have plenty of incentive to work in Ohio."